2020 (11) TMI 1060 - AAAR - GST

Exemption from GST - Lease Agreement between the Appellant Company i.e. the Lessee and RLDA for a period of 99 years - whether amount transferred by the Appellant Company as Security Deposit in pursuance to the tender and lease agreement dated 08.11.2019 is exempt under GST in view of the N/N. 04/2019-Central Tax (rate) dated 29.03.2019 or N/N. 12/2017-Central Tax (rate) dated 28.06.2017? - HELD THAT - It is observed that the appellant has totally misconstrued the clause 26.3 which provides for forfeiture of bid security deposit in case of breach of the Bid by the Bidder. We are not in agreement with contention of the appellant that if any instalment of lease premium amount is refunded in case of breach of Bid its nomenclature will be changed from Premium to Security amount. In the LOA and the Lease agreement it is clearly mentioned that the first instalment of lease premium shall be Rs. 143667891/- and the Bidder has deposited an amount of Rs.158657105/- (Premium Interest) in the month of February 2019. Lease agreement has acknowledged the payment of first instalment of lease premium in compliance of LOA which forms integral part of Lease Agreement - every agreement is independent in itself and conditions may vary from each other except the conceptual facts and principles. The Appellant has deposited the amount as lease premium after issuance of LOA. Furthermore in the main portion of lease agreement which occurs on 18.11.2019 both parties i.e. RLDA and Appellant themselves has found it as 1st installment of the lease premium. It is a fact that RLDA has issued LOA on 26.09.2018 addressed to M/s H. S. Mehta Infra Pvt. Ltd. Lead Partner of consortium. As per condition of LOA the consortium was required to create a SPC therefore appellant company has been incorporated as SPC. The Appellant in pursuance to LOA has deposited first installment of lease premium of Rs.15 86 57 105/- by various RTGS on different dates from 16.02.19 to 22.02.19. Therefore in view of above facts and provisions of law it is observed that time of supply of service is 25.11.2018 which is after 60 days post to LOA and before the date of payment of premium. Even the date of payment of lease premium is prior to 01.04.2019 - the exemption under Entry No. 41B of the Notification No. 12/2017 dated 28.06.2017 inserted vide Notification No. 04/2019 dated 29.03.2019 is not available to the appellant. On perusal of LOA it is noticed that in para 6 of LOA it is clearly mentioned that LOA shall constitute a binding contract till the lease agreement and remaining paras of LOA tell about total premium and many other things about lease. Therefore instead of lease agreement LOA issued on 26.09.2018 should be treated the document to determine the time of Supply of Services. The payment schedule has been prescribed in the para 3 of the LOA dated 26.09.2018 itself according to which the first installment of lease premium of Rs. 14 36 67 891/- was required to be paid within 60 days of the date of issuance of LOA. Accordingly the first installment was required to be paid by 25.11.2018 - in absence of invoice the date of LOA shall be taken into consideration for determining the time of supply of the service in view of Section 13 (3) (b) of the CGST Act 2017 and SGST Act 2017. Therefore it is held that time of supply of service is 25.11.2018 i.e. immediately following sixty days from the date of issue of LOA which is prior to the date i.e. 01.04.2019 from which the exemption under Entry No. 41B of the Notification 12/2017 has been made effective. As per Section 13 (1) of the CGST Act 2017 liability to pay tax on services arises at the time of supply. As discussed the time of supply of service in the instant case is 25.11.2018 whereas Notification No. 04/2019 dated 29.03.2019 came into effect from 01.04.2019 - the Lease Agreement between the Appellant and RLDA and the amount of Rs. 158657105/-deposited during February 2019 is not exempted from levy of GST under Notification No. 04/2019-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017.

Summary

Issues Involved:
1. Whether the Lease Agreement for a period of 99 years is exempt from GST.
2. Whether the amount of Rs. 158657105.00 transferred as Security Deposit is exempt under GST.
3. Whether the amount of Rs. 158657105.00 deposited during February 2019 is exempt under GST.

Issue-wise Detailed Analysis:

1. Exemption of Lease Agreement from GST:
The appellant argued that the Lease Agreement between the appellant and RLDA for 99 years should be exempt from GST under Notification No. 04/2019-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017. The AAR ruled that the Lease Agreement is not exempt from GST. The appellant contended that the amount paid was a refundable security deposit and not a lease premium, and therefore, should not attract GST. However, the Appellate Authority found that the amount paid in February 2019 was indeed the first installment of the lease premium, as specified in the LOA and Lease Agreement, and not a security deposit. Consequently, the lease agreement does not qualify for exemption under the cited notifications.

2. Exemption of Security Deposit from GST:
The appellant argued that the amount of Rs. 158657105.00 transferred as a security deposit should be exempt under GST. The AAR ruled that this amount is not exempt from GST. The Appellate Authority reiterated that the amount paid was the first installment of the lease premium and not a security deposit. The appellant's reliance on the AAR Maharashtra order in the case of M/s E Square Leisure Pvt. Ltd. was found to be misplaced as the facts of that case were different. Therefore, the amount transferred is not exempt from GST.

3. Exemption of Amount Deposited in February 2019 from GST:
The appellant contended that the amount deposited during February 2019 should be exempt under Notification No. 04/2019-Central Tax (rate) dated 29.03.2019 or Notification No. 12/2017-Central Tax (rate) dated 28.06.2017. The Appellate Authority examined the conditions for exemption under Entry No. 41 of Notification No. 12/2017-Central Tax (rate) and found that the lease was for residential purposes, not for industrial or financial business purposes. Therefore, the lease did not meet the conditions for exemption. Additionally, the time of supply of services was determined to be 25.11.2018, which is before the effective date of the exemption under Notification No. 04/2019-Central Tax (rate). Consequently, the amount deposited in February 2019 is not exempt from GST.

Conclusion:
The appeal filed by the appellant was found to have no merit and was rejected accordingly. The Lease Agreement and the amount deposited during February 2019 are not exempt from GST under the cited notifications.